Departmental budgets

A Whitehall department's budget refers to the money it spends each year on things like public services, welfare and infrastructure. These budgets account for seven out of every eight pounds of public spending in the UK, with the remaining pound covering areas such as debt interest payments or local authority spending financed through council tax.

Budgets are defined by the limits on spending or what the money is being spent on.

Resource vs. capital

resource spending relates to day-to-day operations, including administration spending which covers running costs (e.g. salaries) and programme spending, which pays for things such as public services and state benefits

capital budgets are spent on investments that add to the public sector’s fixed assets, including transport infrastructure (e.g. roads and rail) and public buildings.

Departmental Expenditure Limits vs. Annually Managed Expenditure

Departmental Expenditure Limits (DEL) cover plans that departments are committed to, announced at Spending Reviews. They are often set for a multi-year period and spending is limited, which means department leaders cannot overshoot their allocated DEL budget

Most departments spend less now than what they did in 2010/11. At the Department for Communities and Local Government (DCLG), spending has fallen by 67% from 2010/11 to 2016/17. However planned day-to-day spending (Resource DEL) is up at DH and DfE.

But this approach to analysing departmental budgets has its limitations. By looking at just the spending totals for each year, without exploring why figures have changed between years, important nuances are missed.

DfE’s budget increased between 2015/16 and 2016/17 because responsibility for further and higher education policy was transferred to the department. The higher budget does not mean that more money is being spent on the public services that DfE is responsible for. It simply means that DfE is responsible for more services.

To fully understand the changes in departmental spending, spending figures for previous years must be adjusted to account for certain types of change, including the transfer of responsibility and budgets between departments and reclassifications (changes in the definitions of different types of spending). Some key changes in recent years include:

Since 2010/11, spending on a like-for-like basis has increased for three departments – the Department for International Development (DfID), Cabinet Office (CO) and DH – while it has fallen for all other departments. The most severe cuts have been at DfT and DCLG, where budgets have fallen by 65%.

Departmental budgets are set at the Spending Review, which sets out government spending plans for a multi-year period. These often happen after elections, but can also happen at other times when considered necessary by government. The most recent spending review was in 2015, which outlined plans until 2019/20. After the snap election in 2017, the returning Conservative Government chose not to revisit this spending settlement.

Between spending reviews DEL budgets can change. Sometimes this is because of technical changes (e.g. reclassifications), but there can also be material changes to budgets, including:

policy changes (such as the measures announced by the Chancellor at the Budget)

allocations from reserve funds controlled by the Treasury, used to top up departmental budgets in the case of emergencies or unforeseen circumstances.

However, it is surprisingly difficult to track changes, especially when it comes to understanding how figures change between publications as a result of changes to the machinery (organisation) of government and to expediture classification.

Our analysis shows that HMT and HMRC are the worst performing departments when it comes to explaining changes in their spending plans.